W.PR.H & W.PR.J To Be Redeemed

that Westcoast Energy Inc. (“Westcoast”) intends to exercise its right to redeem all of its outstanding 5.50% Cumulative Redeemable First Preferred Shares, Series 7 (“Series 7 Shares”) on March 20, 2019 at a price of $25.00 per Series 7 Share, together with all accrued and unpaid dividends.

Westcoast also intends to exercise its right to redeem all of its outstanding 5.60% Cumulative Redeemable First Preferred Shares, Series 8 (“Series 8 Shares”) on March 20, 2019 at a price of $25.00 per Series 8 Share, together with all accrued and unpaid dividends.

Beneficial holders who are not directly the registered holders of the Series 7 Shares or Series 8 Shares should contact the financial institution, broker or other intermediary through which they hold these shares to confirm how they will receive their redemption proceeds. Inquiries from registered shareholders should be directed to Westcoast’s Registrar and Transfer Agent, Computershare Investor Services Inc., at 1 800-564-6253 (Canada and United States) or 1-514-982-7555 (Outside North America).

The 5.50% Cumulative Redeemable First Preferred Shares, Series 7, are W.PR.H, a Straight Perpetual outstanding since 1998-09-01. It has been tracked by HIMIPref™ and is currently assigned to the PerpetualDiscounts subindex.

The 5.60% Cumulative Redeemable First Preferred Shares, Series 8, are W.PR.J, a Straight Perpetual outstanding since 1999-06-22. It has been tracked by HIMIPref™ and is currently assigned to the PerpetualDiscounts subindex.

I consider it significant, in terms of overall market valuation, that the company decided to redeem these issues, even though they were quoted at only 23.70-75 (W.PR.H) and 23.88-99 (W.PR.J) yesterday. Normally I would deprecate the company for paying more than market for the shares (shades of the REI.PR.A redemption!) but at least it wasn’t a ridiculous premium.

5 Responses to “W.PR.H & W.PR.J To Be Redeemed”

Question- Why was this done? Is the company thinking that they are paying too much for 5.6%/5.5% Preferred share when they have cheaper financing alternative to the tune of about 150 bps and that too before tax?

And purely speculative thought: Is ENB.PR.A also a 5.5% perpetual by the mothership next in line?

Not sure anybody will see this 2 days later, but ENB.PR.A is not underpriced. While this perpetual yields 5.8%, ENB Fixed Resets like PR.B will yield more like 6.8% over the long run if GOC-5 stays constant. Credit risk is the same -perpetual – for both but the Fixed Reset looks like a much better deal unless you think GOC-5 is going to be 0.8% forever when it is 1.8% now.
Crazy, discontinuous market. Perhaps only Discount Pref market is “sane” even with huge spreads.

Good point prefhound. IMHO, there’s a difference between company’s perspective and current owners.

For the current owners of ENB.PR.B, the effective spread is (25/15.19*240) or 3.94, which is indeed very health for reasonable credit like ENB.
However, from the company’s perspective, this will always be 240 bps based on the original issue price.
GOC5 will have to increase to 3.1% before the two issues become identical in payout from the company’s perspective.

If our low rate environment persists for another decade, the company is much better off calling ENB.PR.A rather than other fixed resets that have a lower spread.